Correlation Between Skandinaviska Enskilda and AB SKF
Can any of the company-specific risk be diversified away by investing in both Skandinaviska Enskilda and AB SKF at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Skandinaviska Enskilda and AB SKF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Skandinaviska Enskilda Banken and AB SKF, you can compare the effects of market volatilities on Skandinaviska Enskilda and AB SKF and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Skandinaviska Enskilda with a short position of AB SKF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Skandinaviska Enskilda and AB SKF.
Diversification Opportunities for Skandinaviska Enskilda and AB SKF
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Skandinaviska and SKF-B is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Skandinaviska Enskilda Banken and AB SKF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB SKF and Skandinaviska Enskilda is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Skandinaviska Enskilda Banken are associated (or correlated) with AB SKF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB SKF has no effect on the direction of Skandinaviska Enskilda i.e., Skandinaviska Enskilda and AB SKF go up and down completely randomly.
Pair Corralation between Skandinaviska Enskilda and AB SKF
Assuming the 90 days trading horizon Skandinaviska Enskilda Banken is expected to under-perform the AB SKF. But the stock apears to be less risky and, when comparing its historical volatility, Skandinaviska Enskilda Banken is 1.67 times less risky than AB SKF. The stock trades about -0.05 of its potential returns per unit of risk. The AB SKF is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 20,300 in AB SKF on August 28, 2024 and sell it today you would earn a total of 570.00 from holding AB SKF or generate 2.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Skandinaviska Enskilda Banken vs. AB SKF
Performance |
| Timeline |
| Skandinaviska Enskilda |
| AB SKF |
Skandinaviska Enskilda and AB SKF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Skandinaviska Enskilda and AB SKF
The main advantage of trading using opposite Skandinaviska Enskilda and AB SKF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Skandinaviska Enskilda position performs unexpectedly, AB SKF can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in AB SKF will offset losses from the drop in AB SKF's long position.| Skandinaviska Enskilda vs. Skandinaviska Enskilda Banken | Skandinaviska Enskilda vs. Swedbank AB | Skandinaviska Enskilda vs. TF Bank AB |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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